Weekly Currency Roundup

October 25th – October 29th, 2009
International Markets:
After hitting 14 month lows the past week, the US dollar recouped some of its losses early in this week. Investors also took profits on a host of growth-linked trades that had been in vogue in recent months.
Traders said short-term speculators had been pocketing gains, with hedge funds said to be booking profits ahead of their business year-end in November, and as the recent rebound in both the yen and the dollar saw bets on their weakness unwound.
The euro touched its lowest in two weeks against the greenback while the dollar index rose to its highest in two weeks, pulling further off a 14-month trough hit last week. The Australian dollar fell almost 2 percent against the US dollar on Wednesday, locking up its biggest one-day fall in nearly two months, while the kiwi shed 3 percent, its steepest drop since June, and lost 4 percent on the yen, its biggest decline since February. Both have been favored plays against the low-yielding dollar and yen this year as investors have anticipated higher interest rates in economies seen as recovering faster from the global downturn, and the Aussie has risen about 40 percent against the greenback since early March. U.S. data this week has raised questions about a sustained recovery, with consumer confidence dipping to recessionary levels and new home sales falling unexpectedly. Goldman Sachs on Wednesday cut its forecast for GDP growth to 2.7 percent from 3.0 percent after a report on durable goods, noting that shipments have been somewhat weaker. Given the risk-trade correction underway, some dealers said currency markets might react more to weaker figures than stronger ones, and if so, that could give the dollar a bit more strength short-term. The Fed holds a two-day meeting on Nov. 3-4 and the US employment report for October is scheduled for Nov. 6.
Local Money Market:
The call money rate traded around 2.5%-2.75% this week. Rates took their cue from Bangladesh Bank’s reverse repo rate.
Local Market FX:
The USD strengthened against the BDT this week. The market was active and liquidity was significantly tighter than the previous week.
-- Standard Chartered Bank